Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data

69 Pages Posted: 20 Oct 2011 Last revised: 1 Jul 2015

See all articles by Maxim Mironov

Maxim Mironov

IE Business School, IE University

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Date Written: June 2015

Abstract

We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel - cash is tunneled to politicians in exchange for procurement contracts - and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the "efficient grease" hypothesis: in more corrupt localities, procurement contracts go to unproductive firms.

Keywords: corruption, public procurement, efficient greasing hypothesis, Russia, RusLeaks

Suggested Citation

Mironov, Maxim and Zhuravskaya, Ekaterina, Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data (June 2015). Available at SSRN: https://ssrn.com/abstract=1946806 or http://dx.doi.org/10.2139/ssrn.1946806

Maxim Mironov

IE Business School, IE University ( email )

Calle Maria de Molina 12, 4izda
Madrid, Madrid 28006
Spain

Ekaterina Zhuravskaya (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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